Dabur - Results marginally below estimates :: Religare

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Dabur India Ltd
Results marginally below estimates
Dabur India’s (Dabur) results were below our estimates with Sales/EBITDA/Adj
PAT growth of 14.7%/15.8%/14.3% against our estimate of
18.0%/19.3%/15.2%. Consolidated/standalone net sales for Q2FY11 increased
by 14.7%/13.3 YoY to Rs 9.7bn/Rs 8bn, driven mainly by 10.8% domestic
volumes growth. Consolidated EBITDA grew 15.8% YoY to Rs 2bn with
operating margins at 20.9%. Adj. PAT grew 14% to Rs 1.6bn. The company’s
input costs for the quarter increased sharply, leading to a gross margin erosion
of 210bps YoY. However, stringent cost control measures and lower A&P
expenses (down 170bps YoY) enabled Dabur to report a 20bps expansion in its
EBITDA margin. Rolling forward our valuation from Mar’12 to Sep’ 12 earnings,
we have a Sep ’11 target price of Rs 110 (as against Rs 105 earlier). Dabur is
currently trading at 30.3x/24.7x its FY11E/FY12E earnings. Maintain HOLD.

Volumes drive growth in consolidated net sales: Consolidated net sales for
Q2FY11 increased by 14.7% YoY to Rs 9.7bn, 2.8% below our estimates.
Growth in the company’s domestic Consumer Care Division (CCD)/Consumer
Health Division (CHD) was subdued at 14.2%/14.1% YoY while that in the
Foods business stood at 21.9% YoY. Within the domestic CCD segment, the
health supplements category posted a 31.1% growth driven by strong demand for
Chyawanprash. While the oral care portfolio grew ahead of the market at 11.1%,
the digestives portfolio clocked 14.1% higher sales. Home Care portfolio saw a
robust 42.1% growth on the back of on sustained demand for the Odomos range
of mosquito repellents and Odonil air fresheners. International business grew
18.7% YoY led by robust performance in markets such as GCC, Egypt, Nigeria,
Levant and North Africa.

Gross margins erode 210bps but EBITDA margins sustain: During Q2FY11,
Dabur’s consolidated gross profit grew by a mere 10.4% YoY as gross margins
contracted 210bps on account of a significant rise in input costs (primarily LLP,
edible oils and coconut oil). However, stringent cost control and a 170bps drop
in A&P expenses facilitated a 20bps expansion in the EBITDA margin. EBITDA
for the quarter grew 15.8% to Rs 2bn.

Adj. PAT grows 14.3%: In sync with the topline growth, Dabur’s adj. PAT grew
14.3% YoY to Rs 1.6bn.

Revised target price at Rs 110; maintain HOLD: Rolling forward our valuation
from Mar’12 to Sep’ 12 earnings, we have a Sep ’11 target price of Rs 110 (as
against Rs 105 earlier). Maintain HOLD.